Property vs Precious Metal Investment

For the past few years, property investment has been a hot investment choice for many Malaysians. Most people have the impression that a typical property would be a landed double storey house. The problem is, such typical house is often too expensive for majority medium class working employee to invest. Hence we would turn to cheaper alternative such as apartment or condominium.

The most common method of investing in apartment or condominium is to buy one (or multiple) unit during developer launch, keep it for a few years and sell it off for a profit upon completion. This method has little hassle as property developers often bear the transnational costs – although the truth is property developers have already factored those costs into selling price, we will leave that for a separate discussion.

Take a look at precious metal investment. The most common forms of precious metal are gold and silver. Gold is the typical grade of precious metal, which you can see it as the landed double storey in property investment; silver is the more affordable alternative of precious metal, which you can see it as the apartment grade of investment.

How much cheaper is silver compare to gold?

At the point of writing this, gold and silver price over Maybank counter has been taken as following:

maybank gold & silver price

Gold is selling at RM138.22/gram while silver is RM2.16/gram. In other words, silver is approximately 64 times cheaper compared to gold. We call this as the gold/silver ratio. This can be calculated simply by dividing gold price by silver price.

In fact if you look into the history, silver has always been much cheaper compared to gold:

gold silver ratio

Regardless which point of the history you are looking at in the past 20 years, silver price was fluctuating between 86 times to 32 times cheaper compared to gold.

You can make profit base on gold silver ratio alone without worrying gold price and silver price individually. This could be achieved by buying silver when gold silver ratio is high, swap your silver to gold when gold silver ratio is low, then swap your gold back to silver when gold silver ratio is high. Continue the swapping, you could have doubled or tripled your precious metal possession given enough time.

(I discussed gold silver ratio with much greater practical details in my eBook)

So what are the difference between gold and silver?

  1. Central banks do not hold silver. Gold and silver have long been considered money in the history. However, central banks do not hold silver because for the same amount of money central banks require a much large storage to keep silver.
  2. Silver price is more volatile than gold price. When silver price goes up, it goes much large in percentage compared to gold price. Similarly, when silver price comes down, it comes down much large in percentage compared to gold price.
  3. Silver price is traded far lower compare than the physical ratio. The average mining ratio for gold and silver is 1 to 10. It means when a miner digs the earth, on average the miner would find 10 gram of silver together with 1 gram of gold. However the trading price for silver is approximately 64 times cheaper as of today. How long can this go on?
  4. From point #1, we know that gold is mainly kept by central banks. However silver is mainly consumed by industrial application because silver is the best conductor of electricity. Gold is the 4th. Silver also has antibacterial properties which made silver widely used in medical field.

Silver is often seen as the poor men’s gold. In property investment, if you do not have a big budget to buy a typical double storey landed property for investment, you can turn to apartment or condominium. In precious metal investment, if you do not have a big budget to buy few kilos of gold, you can turn to silver.

Silver Malaysia eBookPractical Guide For Investing Silver In Malaysia is an eBook specifically written with a Malaysian’s context for silver investment. You will learn different strategies, practical tips and tricks for investing in silver. Click here to find out more.

Silver Price Jumped on Disappointing Economic Data

A positive growth outlook last year prompted the Federal Reserve to start cutting stimulus (money prinitng) in December 2013. Then, in 29th January 2014 Fed said it will cuts another $10 billion of its monthly bond buying from $75 billion to $65 billion. However upon slowing down on stimulus package, economy did not continue to shine.

Silver prices jumped the most in almost four months on 5th Feb as a reaction to the slowing U.S. economy.

jumped

According to Bloomberg, approximately $3 trillion has been erased from equities globally in 2014. Emerging-market currencies (including Ringgit) is weakening and expansion in China is slowing.

The down turn in equities and disappointing economic data are pushing more investors to safe-haven assets such as gold and silver.

Silver Malaysia eBookPractical Guide For Investing Silver In Malaysia is an eBook specifically written with a Malaysian’s context for silver investment. You will learn different strategies, practical tips and tricks for investing in silver. Click here to find out more.

Pay First, Send Later

One of the most cost effective methods to purchase silver is purchasing from online sellers. Precious metal online sellers could range from a company that has a physical setup (office), to someone who someone who sells silver as a part time job – running it at the comfort at his bedroom.

If you recently started buying silver online, you might have a question in mind. Should you pay the seller first? Or the seller should send you the product (silver) first?

Pay first, send later

Either way there are risk to both parties.

If buyer pays first, buyer is putting his money at risk. What if the seller disappears after collecting the money?

If seller sends first, the seller is putting his silver at risk. What if the buyer disappears after collecting the silver?

It is really a chicken and egg situation.

If the seller has a website (eCommerce) that can receive order, the transaction becomes easy and clear cut. When a visitor visits a website, he sees a products that he would like to buy, he clicks on the “Buy” button, enter his details and confirm the order. He can perform the payment online within the website. The payment gateway would typically be direct debit (such as Maybank2U, CIMB Clicks, etc), iPay88, PayPal and offline bank deposit.

In this case, as long as the payment is not received, the seller would not ship out the silver. In fact, if the buyer has selected offline bank deposit as the payment method and did not pay within certain period of time, the order will be voided. This period of time varied for different sellers. The period could be anything in between 2 hours till the next few days.

There is another type of seller that do NOT have an eCommerce website to facilitate the transaction.

This type of sellers are usually individuals. They usually place their margin a little lower, to attract buyers who look for lowest selling price.

If you are buying from individual sellers, there are rooms for negotiation – especially when you are buying large amount of silver. The communication is often done through private message, SMS, email or even phone call. This is where things started to get interesting.

Some buyers would demand seller to ship out the product before depositing the full amount. A minority of sellers would agree to this practice while most would not.

The standard transaction process is always the buyer pays for the silver he wishes to purchase. Then seller would ship out the silver. There is no such rule as “Send first, pay later”. Online transaction is always “Pay first, send later”.

There might be an exception if both the buyer and seller has established a trusting relationship and the seller is willing to bear the risk.

Personally I have done it a few times with seller whom I have been buying from for a long time. I needed the stock urgently. The seller offered to send the stock before receiving the full amount. In return, I offered to maxed out my online transfer limit as deposit and then paid the remaining with cheque on the next working day.

This example is an exception case. Most of the silver transactions I had is still “Pay first, send later”.

The standard policy for silver transaction is “Pay first, send later”. This happens in both eCommerce platforms and individual sellers. If this is the first time you are buying silver and wondering whether the seller should send first, or you should pay first, the answer is “Pay first, send later”.

However, if you feel “Pay first, send later” is a risky move, you can consider the following:

  1. Only buy from reputable online sellers
  2. Only buy small quantity to “try” out a seller
  3. Request seller for COD (Cash on Delivery) instead of online payment and postage.

I will discuss more on COD (Cash on Delivery) on next week post.

Silver Malaysia eBookPractical Guide For Investing Silver In Malaysia is an eBook specifically written with a Malaysian’s context for silver investment. You will learn different strategies, practical tips and tricks for investing in silver. Click here to find out more.

Silver Price 1970

According to Wikipedia, technical analysis is security analysis discipline for forecasting the direction of prices through the study of past market data. Last week I talked about silver price is trapped in a flag. I used gold past market data to forecast the direction of silver price. If you missed that post, I recommend you read it again.

This week we will look at an interesting historical silver price movement to forecast today’s silver price movement. We will go back to history in 1968 to 1973. Notice I have drawn 13 points within this period for all the ups and downs. After point 13th, silver price shoot up.

Now in 2012. I noticed there is a similar pattern in our silver price for the past 1 year.

See them carefully. These 2 charts are very identical. Are we in point 13th already? If we are, does it mean silver price will shoot up anytime now? I will leave it for you to answer!

My friend Ikram Adi is very good at forecasting silver price. He has a special and simple technique to determine when is a good time (and when is a bad time) to buy silver. This is what he said before the major silver price crash 30% in May 2011. He forecast it would be 30% drop and his words came true. He targeted price would revert at between $30 to $34 and the fact is, price reverted at $32.40. Again, his forecast is accurate. Quite an amazing guy right?

After I study his material, I realized that he is a very knowledgeable investor. I really recommend you study his material too.

If you want to learn more about silver investment in depth, my friend Ikram Adi has shared his Strategy Of Buying Silver With 79% Discount in his eBook. Please visit his website to download a free copy of 18 pages!

Hope you have enjoyed my post for Silver Price in 1970. Happy Investing!

Today Fair Silver Price

English

Many people have asked how much silver price will rise to. In order to answer that, we will have to check what is today fair silver price. One of the best way to look for this answer is look back to history.

During the height of Roman Empire, each day a worker and soldier on average will get paid for 1 Roman Denarius, which is 1/10 of 1 oz silver.

Roman Denarius

This 1 Roman Denarius, (I repeat, which is 1/10 of 1 oz silver) is able to pay for a man and his family expenses. That includes food, clothes, shelter, tax and occasionally entertainment. These soldiers have to fight under extreme condition. Probably they will have to fight with their bare hands and prepare to sacrifice their life. For the average workers, they will have to work 12 hours a day to earn the 1 Roman Denarius (again, this is 1/10 oz of 1oz silver).

Make a comparison in today economy, on average, an American worker or soldier get paid for $ 8 / hour. If they are working 12 hours a day like how the Roman worker did, that would make up $ 96 a day:

So if 1/10 oz of silver is $96, 1 Roman Denarius x 10 will equals to today 1oz silver coin. Let’s take 1oz American Silver Eagle as example, the coin will worth $960 in today price:

Today Fair Silver Price

I won’t say modern silver price will go up to $ 960 / oz next month. But history has shown us silver definitely has a lot more room to grow from today price! If you like to get update from me, please subscribe now to get updates from me from time to time.

Bahasa Malaysia

Ramai orang telah bertanya berapa banyak harga perak akan meningkat. Untuk menjawab soalan ini, kita perlu tahu harga perak yang berpatutan pada ketika ini. Salah satu cara terbaik untuk mencari jawapan ini adalah merujuk kembali kepada sejarah.
Semasa kemuncak Empayar Rom, setiap hari seorang pekerja dan askar secara purata akan mendapat bayaran sebanyak 1 Roman Denarius, iaitu merupakan 1/10 daripada 1 Auns perak.

1 Roman Denarius ini (ulangi, yang merupakan 1/10 daripada 1 Auns perak) cukup untuk membayar seseorang dan perbelanjaan keluarganya. Ini termasuk makanan, pakaian, tempat tinggal, cukai dan kadang-kadang hiburan. Askar-askar perlu berjuang di bawah keadaan yang melampau. Kemungkinannya mereka akan berjuang tanpa senjata dan bersedia untuk mengorbankan nyawa mereka. Bagi pekerja biasa, mereka perlu bekerja selama 12 jam sehari untuk mendapatkan bayaran 1 Roman Denarius (sekali lagi, ini adalah 1/10 Auns daripada 1 Auns perak).

Membuat perbandingan dalam ekonomi hari ini, secara purata, seorang pekerja atau askar Amerika akan dibayar $ 8 / jam. Jika mereka bekerja 12 jam sehari seperti pekerja Rom lakukan, mereka dibayar $ 96 sehari:

Sekiranya 1/10 Auns perak adalah $ 96, 1 Roman Denarius x 10 bersamaan dengan harga 1 Auns coin perak hari ini. Sekiranya kita menguna American Silver Eagle sebagai contoh, coin ini akan bernilai $ 960 harga hari ini:

Saya tidak akan kata harga perak moden akan capai $ 960 / Auns bulan depan. Tetapi sejarah telah menunjukkan kepada kita bahawa perak sudah pasti mempunyai banyak lagi ruang untuk berkembang daripada harga hari ini! Sekiranya anda hendak mendapatkan kemaskini daripada saya dari semasa ke semasa, sila melanggan dalam senarai mel saya.